Big financial challenges ahead for universities, HEFCE report warns

Universities face tough financial challenges over the next three years, a report from the Higher Education Funding Council for England has warned.

HEFCE’s annual review of the financial health of the sector has found universities are expecting only a small increase in undergraduate student numbers in the coming year, despite an additional 30,000 funded places being made available by the government. Greater increases are expected the following year when restrictions on numbers will be completely removed, but forecasts from institutions on student intakes over the coming three years vary enormously.

To help plug financial shortfalls, universities are hoping to significantly increase their intake of international students. They are predicting income from overseas student fees will rise from £3 billion in 2012-13 to £4.2 billion in 2016-17.

But a report on the review warns that if the recent slowdown in growth in international student recruitment continues, “there is a risk that the sector will be unable to deliver this level of income”.

In the short term, the sector’s finances look sound, with operating surpluses ranging from £649 million to £980 million over the next three years, HEFCE says. But it warns that “this is against a background of an increasingly competitive environment and reductions in capital funding”.

Professor Madeleine Atkins, HEFCE’s Chief Executive, said:

“Higher education is vital to economic and social prosperity. In a globally competitive environment, universities and colleges in England must maintain and build on their reputation for excellence in research, teaching and knowledge exchange. It remains crucial to secure long-term financial sustainability and to maintain confidence in the financial health of the sector so as to stimulate increased investment.

“There is a wide variation in the projected financial performance of institutions, and there are risks that need careful monitoring and mitigation if institutions are to be sustainable in the long term. There is a continuing need to invest in new facilities to support a high-quality experience for students which will in turn require continued government support.”